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Poland Skirts Euro Zone Woes, for Now

The construction of a luxury high-rise in Warsaw, designed by Daniel Libeskind, is one sign of Poland's economic growth.Credit
Peter Andrews/Reuters

WARSAW — Does Poland have the last healthy economy in Europe?

With robust economic growth, rising foreign investment and a new luxury high-rise, designed by Daniel Libeskind, redefining the Warsaw skyline, it certainly feels like a different world from most of its neighbors, troubled by the debt crisis and recession fears.

Not being part of the euro zone turns out to have been a blessing for Poland — and a lesson in how a national currency can help a country absorb international shocks. But business executives and government leaders are rightly nervous about how long this country of 38 million, the only one in the European Union to avoid recession in 2009, can again escape the euro area’s pain.

“Poland remains an island,” said Lucyna Stanczak, country director for the European Bank for Reconstruction and Development. “The question is, Is it going to remain this way? The slowdown in Western Europe will affect Poland one way or another.”

Trouble is already spilling over the border.

Many of Poland’s banks are expected to change hands as their West European parent companies, like Commerzbank of Germany, struggle to raise cash. The country’s main stock index is down 24 percent since April as international investors reflexively lumped Poland into the same category as ailing East European countries like Hungary or Romania. While there is officially no credit squeeze in Poland, small-business loans are increasingly hard to come by.

“Small companies are not getting financing unless they have a 10-year history and a factory,” said Anna Katarzyna Nietyksza, president of Eficom, a Warsaw consulting firm that provides advice to companies on how to apply for European Union funds or for listing on the Warsaw Stock Exchange. “If you don’t have collateral, something concrete, you don’t get financing.”

Although Poland remains staunchly pro-European, there have been stirrings of discontent, particularly in the main opposition Law and Justice Party led by Jaroslaw Kaczynski, the former prime minister. A rally against closer European integration led by Mr. Kaczynski drew about 3,000 people to the streets of Warsaw on Tuesday, according to a police estimate cited by The Associated Press.

For now, though, Warsaw seems to be one of the few boomtowns left in the European Union. Leveled in World War II and rebuilt with a heavy hand by the Communists, the city is in the midst of a big expansion.

New ring roads, mass transit and bridges may eventually relieve the chronic traffic jams. An undulating 54-story apartment complex designed by Mr. Libeskind, who is based in New York but was born in Poland, will finally offer a challenge to the Palace of Culture and Science, built by the Russians as a monument to Stalin, for supremacy on the Warsaw skyline.

Piotr Czarnecki, chief executive of the Polish operation of Raiffeisen Bank International, an Austrian bank, complains that his daily commute, which should take 20 minutes, often takes an hour and a half because of the city’s jammed roads.

“I was born in Warsaw, my whole family comes from Warsaw for many generations,” he said. “I have never seen such a tremendous scale of investment.”

There are other signs of emerging wealth. The city has a Gucci outlet and a Ferrari dealership, the latter occupying part of a building that was once headquarters of the Polish Communist Party.

Next to the Ferrari showroom, the Warsaw Stock Exchange gained 38 new listings in the three months through September. As a result, Poland ranked behind China and ahead of the United States in the number of initial public offerings during the third quarter, according to a tally by the consulting firm Ernst & Young.

Poland is expected to grow 2.5 percent in 2012, according to the Organization for Economic Cooperation and Development. That is a marked slowdown from more than 4 percent in 2011, but still vibrant compared with Western Europe, which is heading toward recession.

Poland even outshines much of Western Europe in terms of political stability. In October, Poles re-elected a government led by Prime Minister Donald Tusk. It was the first time since the fall of the Iron Curtain that Poles had given a government a second consecutive term, and it contrasts with Western Europe, where turmoil related to the debt crisis has led to the removal of leaders in several countries.

Officially, Poland is still moving toward adopting the euro. In fact, membership is mandatory under the terms of the agreement that allowed Poland to join the union in 2004.

“The official view is yes, we would like to be in the euro zone,” said Andrzej Raczko, a member of the management board of the National Bank of Poland, the central bank. “But it’s difficult to tell now when.”

The timing depends on how quickly Poland meets the economic and budgetary criteria to join, he said, as well as the scale and speed of euro zone reforms. The earliest Poland might be ready would be around 2015, officials say, but they have not set a target.

Poland has on balance benefited from a decline in the value of the zloty against the euro, economists say, helping the country’s exports remain price competitive on world markets. The advantages of having a national currency are not lost on local business people.

“We intend to join the euro,” said Ludwik Sobolewski, chief executive of the Warsaw Stock Exchange. “But it would make sense to wait until the euro zone is healthier.”

Still, Poland is economically inseparable from Western Europe. More than half of Polish exports go to the euro area, and more than one quarter to Germany, which is by far the largest trading partner.

The Polish banking market is dominated by institutions like UniCredit of Italy, Santander of Spain and Commerzbank, which are under severe pressure from regulators to bolster their cash reserves. Despite assurances by the banks that they stand by their subsidiaries, policy makers fear that the foreign owners might starve the Polish units of capital or be tempted to sell to less savory buyers.

Russian banks are seen as likely bidders if some Polish banks come up for auction, a prospect that makes many Poles deeply uncomfortable.

Any buyer “should be a well-known bank in Europe without too many problems,” Mr. Raczko said.

But the number of well-known European banks without too many problems is dwindling by the day. “The list of buyers may not be as long as it once was,” said Alan Jarman, chief executive of the Polish unit of HSBC.

With its large domestic market, Poland is more self-sustaining than smaller countries like Hungary. Indeed, for a country that has endured as much in the course of history as Poland, the current crisis seems mild.

“We are very well trained in dealing with a very fast-changing environment,” said Mr. Czarnecki of Raiffeisen bank. “If you ask a Polish entrepreneur about the last 21 years of transformation, he’ll say every year was a roller coaster.”

Correction: December 16, 2011

An article on Thursday about the surging economy in Poland, in contrast to its European Union neighbors, omitted part of the name of an Austrian bank with operations in Poland. That bank, whose leader in Poland, Piotr Czarnecki, complained of jammed roads in Warsaw, is Raiffeisen Bank International, not Raiffeisen International.

A version of this article appears in print on December 15, 2011, on page B1 of the New York edition with the headline: Poland Skirts Euro Zone Woes, for Now. Order Reprints|Today's Paper|Subscribe